Contractors spend weeks writing a tight technical approach and sharpening their pricing. Then they lose the award because their insurance doesn’t match what the solicitation actually requires. This happens more often than most people want to admit. The question of what insurance a government contractor needs isn’t answered by “some general liability policy.” Federal agencies, DoD clients, and large primes each have specific requirements tied to FAR clauses, contract type, and where the work happens.
Most standard business policies weren’t built for federal contracting. A generalist broker won’t always catch the gaps. That’s the reality the team at Risk Reconnaissance LLC deals with every day, helping contractors build compliant coverage stacks before proposals go out the door. If you’re done guessing and want to know exactly what government contractor insurance requirements apply to your work, this guide covers six areas: the FAR baseline policies, contract-specific coverage types, subcontractor obligations, bonds, COI language, and how to map all of it to your actual contract.
What Insurance Does a Government Contractor Need: Baseline Policies
FAR 28.307 and the insurance clause at FAR 52.228-5 define the floor for most federal contracts. These apply regardless of agency, contract type, or dollar value. The contracting officer can require higher limits in the solicitation, and often does. The FAR minimums are the starting point, not the ceiling.
Commercial general liability: what limits to expect
The FAR minimum for general liability is $500,000 per occurrence for bodily injury. In practice, civilian agencies push this to $1 million or higher. This contractor liability insurance protects against bodily injury and property damage claims tied to your work. The limit written in the solicitation always overrides the FAR baseline, so read the insurance clause before assuming your current policy is enough.
Automobile liability for work on or near government sites
The FAR split limits for automobile liability are $200,000 per person, $500,000 per occurrence for bodily injury, and $20,000 per occurrence for property damage. If your employees operate any vehicle during contract performance, you need this coverage. Many contractors doing office-based work overlook it entirely, which creates a gap that shows up at the worst possible time.
Workers’ compensation and employer’s liability
Workers’ comp must meet applicable state law. Employer’s liability requires at least $100,000 under the FAR. This is domestic-only coverage. It does not apply to employees injured while working outside the United States. That distinction matters a great deal if your contract takes anyone overseas.
Coverage That Kicks In Based on Your Work Type or Location
This is where the coverage stack becomes contract-specific, and getting it wrong is expensive. These three coverage types are triggered by what your contract requires you to do, not simply by the fact that you hold a federal contract. Not every contractor needs all of them, but every contractor needs to know which ones apply before a solicitation closes.
Professional liability (E&O) for IT, engineering, and services contracts
Professional liability, also called errors and omissions coverage, is not a FAR baseline requirement. Civilian agencies add it routinely for service, engineering, and IT work. Federal field practice puts common E&O limits between $1 million and $5 million per claim. If your contract involves advice, design, analysis, or any deliverable where an error causes financial harm to the government, plan on needing this coverage.
Defense Base Act insurance for overseas and contingency-zone work
Defense Base Act (DBA) insurance replaces domestic workers’ comp for employees working outside the U.S. on federal contracts. If your contract involves work in a foreign country or on a U.S. military installation overseas, DBA coverage is mandatory under federal law, not optional. Domestic workers’ comp does not cover injuries that happen overseas. DBA must be in place before performance begins, and it covers U.S. citizens, host-country nationals, and third-country nationals alike. Both prime contractors and subcontractors are required to carry it.
What Insurance Does a Government Contractor Need for CUI and Cyber Risk?
Federal IT and cleared work increasingly requires standalone cyber liability coverage. DoD-adjacent contracts handling Controlled Unclassified Information (CUI) commonly push required limits to $5 million or higher. Mid-size DoD contractors often see underwriting floors of $3 million to $5 million. CMMC compliance doesn’t eliminate the need for cyber insurance. It runs alongside it as a separate contractual obligation.
Do subcontractors need their own insurance policies?
Many subcontractors assume they’re covered under the prime’s policy. Usually, they’re not, and that misunderstanding can expose a subcontractor to serious liability before a single day of work is complete.
How FAR 52.228-5 puts the burden on the prime (and flows down to subs)
FAR 52.228-5 requires the prime contractor to flow the insurance clause down to subcontractors performing work on a government installation. The clause obligates subcontractors to maintain and provide their own coverage. The prime is responsible for verifying compliance before work begins and cannot simply assume a subcontractor is covered and move on.
When a subcontractor can be covered under the prime’s policy
This situation is rare and depends on an explicit policy endorsement or contract language that specifically extends coverage to the subcontractor. Standard prime policies don’t automatically cover subcontractors. If a prime tells a subcontractor they’re “covered,” that claim needs to be verified in writing with the actual policy endorsement. A verbal assurance doesn’t hold up when a claim is filed.
When performance and payment bonds are required
Bonds are often grouped with insurance in conversations about contract compliance, but they’re a separate requirement entirely. Getting bonded takes time, and surprises at the bid stage can cost you the award. Know the thresholds before you submit.
The $150,000 Miller Act threshold for federal construction contracts
Under the Miller Act and FAR, performance bonds and payment bonds are generally required on federal construction contracts exceeding $150,000. Both are typically set at 100% of the original contract price. The performance bond protects the government’s interest if you fail to complete the work. The payment bond protects subcontractors and suppliers who don’t get paid. If the contract price increases, the bond amount increases by the same percentage.
Bid guarantees and when contracting officers require them
A bid guarantee is required whenever a performance bond or payment bond is required. It’s the contractor’s commitment that they’ll execute the contract and furnish the required bonds if awarded. A contracting officer cannot require a bid guarantee unless one of those bonds is also required. That connection is fixed in the FAR, and it matters for your pre-bid planning.
Getting your COI language right before you submit
A Certificate of Insurance (COI) for government contracts is how you prove coverage, and the wrong wording can delay or kill a contract award. Federal agencies and large primes are specific about what they need to see. A generic COI from a broker unfamiliar with GovCon requirements is a common, avoidable problem.
Additional insured wording agencies and primes expect
Federal agencies and large primes typically require the government entity or prime contractor to be named as an additional insured for liability arising out of your work. The COI should reflect an actual endorsement on the policy, not language the broker typed into a description box. Common phrasing looks like this: “The United States of America, its agencies, and/or [Prime Contractor] are named as additional insureds with respect to liability arising out of the insured’s work under the contract, as required by written contract.” The COI must match the endorsement exactly. If the policy isn’t endorsed, the certificate can’t claim coverage that doesn’t exist.
Waiver of subrogation and notice of cancellation provisions
Waivers of subrogation are commonly required in favor of the agency or prime contractor. The standard language waives all rights of subrogation against the additional insured for losses paid under the policy arising from work performed under the contract. Notice of cancellation provisions, often 30 days, must also appear correctly on the COI. These aren’t formatting preferences. They’re contractual requirements that flow directly from the prime contract or agency clause.
How to build your exact coverage stack for each contract
There is no universal “government contractor insurance package.” A contractor’s coverage needs shift depending on their NAICS codes, the agency they’re working with, the FAR and DFARS clauses in the solicitation, and whether the work is domestic or overseas. The solicitation defines the floor, and that floor changes from contract to contract.
Mapping your coverage to NAICS codes and FAR/DFARS clauses
Different NAICS codes carry different risk profiles, and different agencies layer additional clauses on top of the FAR baseline. A contractor doing IT work under a GSA schedule faces different requirements than one doing construction on a military installation. The solicitation’s insurance clause and any DFARS modifications always define the minimum. Read those clauses before assuming your current policy is still compliant on a new award.
Why a GovCon-specialized broker saves you proposal time
Risk Reconnaissance LLC reviews the specific FAR and DFARS insurance clauses in a solicitation and maps the exact coverage stack needed for that contract. The team communicates contractor risk profiles to underwriters in language underwriters actually understand, which speeds up the quoting process. For contractors working against a tight proposal deadline, that expertise is the difference between submitting compliant paperwork and scrambling at the last minute to fix a coverage gap the contracting officer flags during review. That’s a capability most generalist brokers simply don’t have.
Putting it all together before your next bid
Knowing what insurance a government contractor needs isn’t a one-time exercise. Coverage requirements shift as you move into new NAICS codes, take on subcontracts, or pursue overseas work. The FAR minimums are a starting point. They’re not the full picture, and they’re not always the limit the contracting officer will accept.
Before every bid, work through six coverage areas. Start with general liability, professional liability, and workers’ compensation. Then check whether Defense Base Act coverage applies to any overseas work, whether cyber liability is required for IT or CUI contracts, and whether automobile liability and construction bonds are in scope for your award. Each item applies or doesn’t based on your specific contract, the solicitation tells you which ones matter for that award.
Before the next bid goes out, review your current coverage against the solicitation’s insurance clause. Get your COI language reviewed by someone who understands federal contracts. Risk Reconnaissance LLC works exclusively with government and defense contractors and knows what compliant coverage actually looks like in practice, so you’re not educating your broker on what a DFARS clause is the week a proposal is due.